Question

36 months ago, you borrowed $30,000 from your local credit union on a 60 month car loan at an interest rate of 3.2%. You have made your monthly payments right on time but you now want to pay off this car and buy a new one. How much do you still owe on this car?

A.There is not enough information to figure this one out!

B. $12,577.97

C. $12,545.65

D. $14,985.32

Answer #1

PV_{Ordinary Annuity} = C*[(1-(1+i/100)^(-n))/(i/100)] |

C = Cash flow per period |

i = interest rate |

n = number of payments |

30000= Cash Flow*((1-(1+ 3.2/1200)^(-5*12))/(3.2/1200)) |

Cash Flow = 541.73 |

Principal remaining after 3 years

PV_{Ordinary Annuity} = C*[(1-(1+i/100)^(-n))/(i/100)] |

C = Cash flow per period |

i = interest rate |

n = number of payments |

PV= 541.73*((1-(1+ 3.2/1200)^(-2*12))/(3.2/1200)) |

PV = 12577.97 |

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